Introduction to 'Transferable' Reward Points PLUS
Different credit cards earn different types of rewards.
In order to decide which credit card earns the most valuable rewards or offers the most lucrative signup bonus, you need to understand the different types of points that are available. Some points are more valuable than others and the value of each type of points depends on your own individual circumstances.
You can earn cashback, cash-like points, frequent flyer miles, hotel points, or flexible "transferable" points.
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Different types of points have different values
It is not the NUMBER of points you earn that is important, it is the VALUE of the points. Different types of points have very different values, just like currencies. In a similar way that $1 is worth more than 1 pesos, 1 Hyatt point is worth more than 1 Hilton point.
For example, the Hilton Ascend's 6x rewards on groceries sounds a lot better than the Amex’s Everyday's 2x rewards. However, the Hilton points are worth around 2.7 cents per dollar and the Membership Rewards points are worth around 3 cents per dollar. So 2x Membership Reward points is actually the more valuable reward rate
As another example, a 100,000 Marriott point signup bonus sounds a lot better than a 50,000 Hyatt point bonus. But a night in a typical Hyatt downtown hotel only requires 8-12,000 points, while a night in a similar Marriott hotel requires 35,000 points. The Hyatt offer would give you more free nights (at approximately the same level of hotel). In terms of our base point values, the Hyatt offer is worth about $875 (before costs), while the Marriott offer is worth $700.
Each of the types of point is discussed in more detail below. The quick summary is:
- For most people, the best type of point to earn from your credit card spending are Chase's Ultimate Rewards points. They are very valuable, easy to earn, and easy to use—whether you are a beginner or an expert.
- You (almost) never want to use an airline or hotel credit card for your credit card spending. You’ll get more valuable rewards from other cards. A few hotel and airline cards are worthwhile to use when you are making a purchase directly with them, but even then, a card that earns good bonus rewards on all your travel spending is usually a better option.
- Hotel points are much easier to use than most frequent flyer miles. Until you are confident you can take good advantage of frequent flyer programs, we would value a typical hotel signup offer as more valuable than a good airline signup offer.
If you don’t want to mess around with frequent flyer tickets, Amex’s Membership Rewards and Citibank ThankYou points are only worth around 1 cent each. However, even at this rate, some of their cards still have valuable signup bonuses and reward rates. If you are collecting signup bonuses, Membership Reward points are some of the easiest points to earn.
If you are flexible and willing to invest the time, the best use of your Membership Reward, Ultimate Rewards, and ThankYou points is to convert them to frequent flyer points to book award tickets. However, it can be hard to use your points in this way. If you plan to use your points for business or first class plane tickets, and you value those tickets highly, each of these type of points (and many types of airline miles) are worth 3 or more cents each, and you’ll always want to earn these types of points. Once you know you can take good advantage of frequent flyer points, points from foreign programs are usually around as valuable as points from US programs. For example, you can easily use 50,000 British Airways points to book tickets on American Airlines. If you frequently travel on Amtrak, they are the most valuable points you can earn.
Cashback
Some cards earn points that can be converted directly to cash. This is obviously very flexible, easy to use, and straightforward to value.
Cash-like Points
Other credit card points work kind of like cash but need to be redeemed for travel. Sometimes, you'll have the option of using them for other things like gift cards, but they are worth more for travel or airfare purchases.
- This isn't as flexible as true cashback, but to keep things simple, you might want to treat these points as if they were worth full value. For example, the Altitude Reserve card earns 3x points on mobile wallet purchases and you can use your points to purchase travel through U.S. Bank at a rate of 1.5 cents each, so we treat this the same as getting 4.5% cashback. We assume that everyone is purchasing enough travel each year to be able to redeem their points on travel purchases. However, due to some drawbacks of needing to use points in this way, they are really worth somewhat less.
If you can use the points to "erase" a travel purchase made with the card, this is the best way to redeem these points. Some reward programs let you use your points to rebate all or part of the cost of any travel-related charges. Instead of needing to use the credit card company's travel booking site, you can use whatever site gets you the best rates and benefits. You'll also earn
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